OFFICIAL STATEMENT
OF MOVEMENT FOR MONETARY JUSTICE ON RECENT
GOVERNMENT ECONOMIC POLICIES
INCLUDING THOSE TO COPE WITH THE
WUHAN VIRUS OR COVID19 EPIDEMIC
First of all, Movement for Monetary Justice would
like to call to attention of the Government, all Economists and the people, on
two new discoveries in Economics.
Firstly, in a nation, money are not created by
central banks or governments, but by banks. In any country, the government
through the Central Bank only creates on average about 3% of the nation’s money
i.e, the paper notes and coins we use. Whereas on average 97% of money is
created by banks make when they make loans. In Malaysia the percentage is 5%
and 95% respectively.
Money created by the banks however is not in the
form of paper notes or coins. It is in the form of a numbers that appear in our
bank accounts online, when the bank disburse a loan or financing.
And when we and companies make payments through internet,
online portals, interbank transfers, cheque books, ATM machines and so on we do
not need this money to be in the form of paper and coins. It is sufficient in
the form of numbers that can be transferred online.
This is 95% of the money in this country that is
being used for development and expenditure.
The fact that the Banks are money creators has
been confirmed no less than by the Bank of England, the European Central Bank
and the Federal Reserve. Please refer to our website at mmj.my for articles
proving this fact.
Movement for Monetary Justice has repeatedly tried to meet the Government
to explain this phenomenon but we have consistently failed to get their serious
attention. We are pleased to inform that Movement for Monetary Justice is not
alone in the world in advocating this new knowledge.
Movement for Monetary Justice is now the newest member of the global movement
called International Movement for Monetary Reform. In many countries today
there are NGOs like Movement for Monetary Justice fighting for Reform of
Monetary System, nationally and internationally.
Among them are Positive Money from the UK,
Positiva Pengar from Sweden, Monetative from Germany, Gode Penge from Denmark,
Mouvement Monnaie Juste from France and First Source Money from South Africa.
Of course, the solutions proposed by
Movement for Monetary Justice will comply with the demands of Islam.
Why is it important to understand this new
knowledge for a country, including Malaysia?
A government’s economic policy relies heavily on
the assumptions the policy makers believe and executes.
If policy makers are incorrect in their
assumptions and beliefs, when they recommend and execute an economic policy
then the results will not be achieved, much to the detriment of the nation.
For example, the economics being studied at the university and even perhaps
believed by people drafting our national economic policies today is that there
must be a certain savings in a country before investment can occur.
When we however understand that a bank is a money
creator, then the new reality is that investment will take place wherever the
bank points the money hose, and does not depend on whether or not there are
savings before the investment.
This new economic discovery is now upheld by the
most prominent economists in the world today ie it is investment that creates
savings, not savings that create investments.
Therefore, the right policy to achieve the best results
for the country’s economy must be ones
that allow the government to control and
point the banks’ money hoses to the most apt industries and sectors of
the nation.
It should of course be pointed to the real
economic sector, such as the SMEs, the manufacturing and agriculture sectors,
and not to personal debts and credit card sector as preferred by banks. It turns out that of loans from banks today,
80% go towards personal loans, credit cards and housing. Bank loans must be directed to the real
economy which will create jobs and increase economic output.
Movement for Monetary Justice invites a paradigm
shift considertion by society by posing a question. Should we hand to the private sector such a very important
ability of the nation, as money creation? We have actually handed this right to
create money, knowingly or unknowingly, to banks in the private sector.
Please refer to our website at mmj.my for solutions
that we have provided to address this problem.
Turning to the Wuhan Virus or Covid19 outbreak,
among the government’s declared measures through its central Bank is to
increase liquidity by lowering interest rates.
The first question is, do loans
taken by the companies really depends on low interest ratesa Many studies have
been conducted that refute this assumption; A company assumes loans based on
its needs, which have nothing to do with prevailing levels of interest.
But the more relevant question is whether the debt
industry is the solution, or is it actually the cause of all problems?
In the Islamic Worldview, debt is never a
component in the development of an Islamic economy. The only Islamic form of
debt that is recognised is Qardhul Hassan, or interest-free loan to help the
poor. Other debts such as Murabahah and the like, are just usual trading
practices of Muslims, and cannot and must not be a mainstay of the Islamic debt
industry; a growing industry that many are skeptical as to whether it is truly Islamic.
Debt should not be an industry. The economy of an
Islamic State should be mobilized and driven by Islamic equity principles of Musyarakah and
Mudharabah, in sync with the Qaiddhah Fiqhiyyah, AlGhunum bi Alghurm – meaning
rewards only with risk. That is, a Muslim is not entitled to receive a reward unless
he is willing to accept the risk.
The country’s unwillingness to move its paradigm from
debt to equity is actually the legacy of mind gripping Western couched education,
contrary to Islamic world views, that has gripped the minds of people to this
day.
Movement for Monetary Justice is also intrigued by
the recent statement by the Minister of Finance that the government is willing
to restructure loans to SMEs allowing them to make no payments during the
Corona Virus crisis. This means actually “the loans will remain unchanged, and
maybe even increased in amount but we allow you to stop paying for it in the
meantime”
This statement illustrates the example of a solution derived from a debt gripped mind described above. The Ministry of Finance’s response should be that to help SMEs, the Government is willing to turn its debt financing into equity financing, running the tide together with the SMEs, true to its call of a caring government.
If the Minister of Finance worries about how to handle equity replacing
debt, Movement for Monetary Justice, God willing, is able to assist him for we
have had the detailed solution a long time ago.
We look forward to sit down with the policy makers if invited.
Thank you.
Secretariat,
Monetary Justice Movement,
Kuala Lumpur.
monetaryjustice@gmail.com
Friday 20th March 2020.